--- title: "Objectives of appraisal; financial, technical appraisal" subject: "Project Engineering" chapter: 2 key: "semester_7/project_engineering:appraisal-objectives-financial-technical" source: https://www.bctengineer.com/q/semester_7/project_engineering/appraisal-objectives-financial-technical site: BCT Engineering --- # Objectives of appraisal; financial, technical appraisal Project Engineering · Chapter 2: Project Appraisal and Project Formulation - Asked in: 2072 Chaitra, 2+4 marks - Video: [PROJECT APPRAISAL 1 TECHNICAL APPRAISAL](https://www.youtube.com/watch?v=_2wsLlkj-fk) — Shashi Aggarwal - Answer checked by Claude Opus 5.5 (high effort) on 2026-10-14 - Page: https://www.bctengineer.com/q/semester_7/project_engineering/appraisal-objectives-financial-technical - Whole chapter: https://www.bctengineer.com/md/semester_7/project_engineering/chapter-2 ## Question What are the objectives of project appraisal? Explain financial and technical appraisal in detail. ## Short answer Objectives include checking technical soundness, financial viability, economic benefit, environmental and social acceptability, comparing alternatives, identifying risks, and providing a basis for approval and financing. Technical appraisal checks technology, site, design, resources, construction method, schedule and technical risks. Financial appraisal estimates capital and operating costs, funding, revenue, cash flow, and indicators such as NPV, IRR, B/C ratio, payback and DSCR. ## Answer #### Objectives of project appraisal - To check whether the project is technically sound and feasible. - To test whether it is financially viable and economically beneficial. - To ensure environmental and social acceptability. - To compare alternatives and rank projects for scarce funds. - To identify risks and recommend improvement. - To provide a basis for approval, financing and later monitoring. #### Technical appraisal Checks whether the project can be built and operated as planned: - Suitability of technology and process; capacity and scale. - Site and location, geology, topography, availability of land. - Design, layout, standards and specifications. - Availability of raw materials, utilities (water, power), manpower and equipment. - Construction method, schedule and operation and maintenance arrangements. - Technical risks and alternatives. #### Financial appraisal Checks whether the project is profitable and can be funded: - Estimate of capital cost (fixed and working capital) and operating cost. - Sources of finance, debt-equity mix, loan terms and interest. - Projected revenue, profit and cash flow. - Indicators: NPV, IRR, B/C ratio, payback period, debt service coverage ratio (DSCR). - Break-even point and sensitivity to changes in cost, price and demand. ## Check yourself The answer's key points as multiple-choice questions, with the correct option and why. 1. Which is an objective of project appraisal? A. To avoid identifying risks B. To construct the project C. To hire the staff D. To compare alternatives and rank projects for scarce funds Answer: D. Appraisal objectives include comparison and ranking, risk identification and a basis for approval. (Key point: Objectives) 2. What does technical appraisal check? A. Whether the project can be built and operated as planned B. Whether the nation benefits economically C. Whether the tariff is high D. Whether the loan interest is low Answer: A. Technical appraisal covers technology, site, design, inputs, construction and O&M. (Key point: Technical appraisal) 3. Which set lists the indicators used in financial appraisal? A. SWOT and logframe B. NPV, IRR, B/C ratio, payback period and DSCR C. Flow duration and head D. Soil CBR and slope Answer: B. These are profitability and debt service measures. (Key point: Financial indicators) 4. What does break-even and sensitivity analysis show in financial appraisal? A. The skills of the labour B. The legal status of land C. The geological conditions D. How viability changes with changes in cost, price and demand Answer: D. They test the robustness of financial results. 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